Selling a Car with a Loan On it
An outstanding car loan can be taken care of a number of ways. They include having the lien released, selling the vehicle or transferring the loan balance to another party.
If you have a vehicle with an outstanding loan balance you can see if you can release the lien and any debt associated with it. In effect, it’s a loan modification. The borrower needs to contact the lender and negotiate acceptable terms. In the end, the car note is taken care of and the lien released.
Sell the Vehicle
When your car settles at a value where it is actually worth more or less the value of the outstanding loan, you can sell it on the open market. Hopefully, the amount received for the vehicle will be enough to pay off the loan. If it is, then pay it in full. If not, you might have to pay any difference between what the loan balance is and what the proceeds are until the loan is retired.
Transfer the Loan
You can transfer the loan to another individual. This means that the one you transfer the loan to assumes responsibility for the car, including ownership. It relieves you from the burden of paying the car note, the possibility of defaulting on the loan and frees you to pursue financing another vehicle.
Selling an Upside-Down Car Note to a Dealer
An upside-down car note is also known as owning a car with negative equity. It means that you owe more on the car than it’s worth. For example, if you owe $5,000 on a car and it’s worth $3,000, you may be able to trade it in when you buy another car.
The dealership will assume the $5,000 you owe on the car and give you $3,000 for the trade- in. The $2,000 difference will be added to the amount you owe for your new car.
The concern is that you will have a higher interest rate and higher payments if you are in this situation.
When you have a car loan still outstanding on a vehicle, it pays to carefully consider all of your options. If the car is worth more than the outstanding loan, and you think you can get that price on the open market, and will subsequently pay off the loan, consider it. If you owe more than the car is worth, your choices become more complicated.